THE REPORT OF THE “EXPERT GROUP” ON PREFERENTIAL GRANT OF MINING LEASES FOR IRON ORE, MANGANESE ORE AND CHROME ORE The Ministry of Steel, constituted an “Expert Group”, on 20th April 2005, for formulating guidelines for preferential grant of mining leases, for iron ore, manganese ore and chrome ore, by state governments. COMPOSITION OF EXPERT GROUP: The expert group was chaired by Shri R.K Dang, Former Secretary, Ministry of Mines and its members included representatives of departments/ministries, state governments, industry representatives and representatives from industry associations and experts in the area of environment and mining. TERMS OF REFERENCE OF THE EXPERT GROUP: The terms of reference of the group was to frame guidelines pertaining to iron ore, manganese ore and chrome ore for the purpose of giving preferential mining rights to certain persons by the State government under section 11 (5) of the MMDR Act PRESENT STATUS: The report of the “Expert Group” was submitted to the Ministry of Steel on 26th August 2005. The recommendations of the Expert Group are under examination. The report of the “Expert Group” is being placed on the website of the Ministry only for the information of stake holders and the public. The recommendations of the “Expert Group”, contained in the report , are still under consideration of the Ministry of Steel and the Government. Nothing contained in this report constitutes policy of the Government on the issues dealt with by the “Expert Group”. *** 1 CHAPTER-I INTRODUCTION 1.1 Preliminary discussions on the Mines and Minerals (Development & Regulation) Act, 1957 1.1.1 The Mines and Minerals (Development and Regulations) Act, 1957 (As amended by Notification No.GSR 572(E) dated 16.8.2002) (called the Act hereafter), regulates the grant and operation of permits/licences/leases (called leases hereafter) for the extraction of, interalia, iron ore, manganese ore and chrome ore. 1.1.2 In the “PRELIMINARY” of the Act, it is declared in Section 2 as under:- “Declaration as to the expediency of Union control It is hereby declared that it is expedient in the public interest that the Union should take under its control the regulation of mines and the development of minerals to the extent hereinafter provided” Subsequent provisions in the Act have, presumably, been made with care and deliberation, keeping in mind the geography and federal structure of India and to promote National interest. 1.1.3 In the matter of interse priority for grant of leases, other things being equal, the Act stipulates adherence to ‘First Come First Served’ principle, but specifically provides for alternative determination of interse priority for preferential grant of leases in consideration of certain matters. 1.1.4 As per section 11(5) of the Act, however, the State Government may, for any special reasons to be recorded grant a reconnaissance permit, prospecting licence or a mining lease, as the case may be, to an applicant whose application was received later in preference to an applicant whose application was received earlier. The proviso states that prior approval of the Central Government shall be obtained before passing any order under this sub section of Section 11(5) in respect of minerals specified in the First Schedule of the Act (Excerpt at Annexure-I). 2 1.1.5 While the principle of ‘first come first served’ is in keeping with constitutional provisions and the principles of natural justice, the Act clearly recognizes that it is not necessarily the best or only criterion to govern grant of mineral concessions to serve the national interest. In fact, section 11(3) of the Act read with Section 11(2) specifically provides for determining interse priority among lease applicants, not on the ‘first come first serve’ basis but on the basis of knowledge, experience, resources, development of downstream industry etc. and “such other matters as may be prescribed” (excerpt at Annexure-II). 3 1.2 Background of developments leading to constitution of the Expert Group. 1.2.1 In the 1st meeting of the Project Coordination Group (PCG) held on 22.12.2004 under the Chairmanship of Hon’ble Steel Minister, a decision was taken that Ministry of Steel, in consultation, with Ministry of Mines and based on the deliberations in the above mentioned meeting, would prepare guidelines for State Governments to recommend mining leases. A decision was also taken for proposing required amendments in the MMDR Act. 1.2.2. Various State Governments e.g. Orissa, Karnataka, Chhattisgarh and Jharkhand have been framing divergent guidelines and criteria for assigning interse priority for recommending preferential grant of leases for these minerals to the Central Govt. in terms of section 11(5) of the Act. The local guidelines and the special reasons for making departure from ‘first come first served’ principle have, not infrequently, been of a case to case and ad-hoc nature - not altogether in conformity with the letter and the purpose of the MMDR Act and the related National Mineral Policy e.g. some State Governments have shown inclination to accord preference to applicants who agree to put up mineral based downstream industry within the State boundaries. The Act does not appear to provide any legitimacy for such stipulation. This has caused anomalies leading to a large number of Revision Petitions under section 30 of the Act read with Rule 54 of Mineral Concession Rules, Court cases and prolonged bottlenecks in grant and delay in operation of leases for Iron Ore etc. to service the steel and ferrous industry. 1.2.3 Iron ore, manganese ore and chrome ore are critical raw material inputs for the steel industry. Their timely and assured availability in adequate quantity and quality on long term basis is a sine qua non for the rapid and orderly growth of the steel and ferrous industry which is a core sector of the national economy. Against this background, Ministry of Steel constituted a Group of Experts to undertake an in-depth examination and frame a set of uniform National Guidelines for a system of Preference to be followed in grant of leases for iron ore, manganese ore and chrome ore. 4 1.3. Notification, Terms of Reference, Objective of the Group of Experts and Members & Resource Persons 1.3.1 Constitution of the Expert Group An Expert Group under the Chairmanship of Shri R.K. Dang, IRTS (Retd.), ex- Secretary, Ministry of Mines was constituted as per office order number 15(9)/2004-RM-I dated 20th April, 2005 for formulating National Guidelines on Iron Ore Mining as per Section 11(5) of Mines and Minerals (Development & Regulation Act), 1957 with the following composition: (Annexure-III) 1.3.2 Composition 1. Shri R.K. Dang, IRTS (Retd.), Ex-Secretary, Ministry -- Chairman of Mines 2. Director General, Indian Bureau of Mines -- Member 3. Managing Director, Tata Iron & Steel Company -- Member 4. Chairman, Steel Authority of India Limited -- Member 5. Executive Director, Sponge Iron Manufacturers -- Member Association 6. CMD, National Mineral Development Corporation -- Member Limited 7. Director General, NEERI -- Member 8. Secretary General, Federation of Indian Mineral -- Member Industries 9. Principal Secretary (Mines), Government of -- Member Karnataka 10. Principal Secretary (Mines), Government of Orissa -- Member 11. Joint Secretary, Ministry of Mines -- Member 12. Shri Moosa Raza, President, Indian Steel Alliance -- Member (Inducted on 26.5.2005) 13. Shri Ajoy Kumar, Joint Secretary, Ministry of Steel -- Member Convener 1.3.3 Terms of Reference “To formulate guidelines pertaining to Iron Ore, Manganese Ore and Chrome Ore regarding giving preferential mining rights to certain persons by the State Government under section 11(5) of MMDR Act, 1957”. 5 1.3.4 Objective of the Group of Experts The issue of critical importance, therefore, is to evolve a reasonable, uniform and optimum set of criteria which is in line with the purposes, the letter and the spirit of the Act and is also in harmony with national interest so that it can serve as a touchstone to guide State Governments for the “special reasons to be recorded” for preferential grant of RP/PL/ML under the provisions of section 11(5) of the Act. The same set of criteria should also be useful with regard to “such other matters as may be prescribed” under section 11(3)(e) of the Act, if required. The ethos and broad direction of the exemplary factors mentioned in section 11(3)(a) to (d) of the Act clearly indicate that their purpose is to promote all round efficiency in mining operations and promotion of industry based on the minerals extracted i.e. value addition. The specific enabling clause 11(3)(e) has to be viewed in the backdrop of the revealed ethos of sub-section 11(3)(a) to (d) so as to give practical form and substance to the omnibus open field of “any special reasons to be recorded” in section 11(5) of the Act in a pragmatic and harmonious manner. 1.3.5 The proposed national guidelines for a Scheme of Preferences must, of course, conform to the letter and the spirit of the Act and Mineral Concession Rules but they must .do more than that. They must also harmonise and sub-serve the National Mineral Policy, draft National Steel Policy, National Industrial Policy and broader national objectives. 1.3.6 Some of the important parameters which have been kept in view in evolving the Scheme of Preferences are flagged below:- i) The overarching sanctity of the Constitution and the Federal structure of India; ii) The global steel and iron ore scenario and India’s place therein. Learning from experience of other countries that pioneered and developed the steel industry; iii) Careful husbanding and efficient utilization of the precious non- renewable national ferrous mineral resource base for rapid and 6 sustainable development of a globally competitive steel and ferrous industry, as an important component of national policy objectives; iv) Leveraging India’s natural advantage in mineral resource to generate multi-level value addition and expansion of domestic product;.